Mergers News: 28/05/09

 

ACQUISITIONS PROMOTE INDIA BRAND IN THE WEST
Sanjeev Krishan and Mohit Chopra
Mint

“India Shining” may not have won the hearts of our electorate, but “Brand India” continued to glitter on the global podium over the last few years. While the worldwide economic meltdown currently takes centre stage in most corporate boardrooms, a common view echoed in every conversation is how emerging markets such as India and China will play an important role in the recovery process.

Cost arbitrage offered by these economies and the large domestic markets continue to attract overseas investors. A reasonably stable political environment has helped too, but what has really been a pivotal factor in getting global recognition are Indian companies’ outbound acquisitions over the last three-four years.

The numbers speak for themselves. Between 2007 and May 2009, Indian companies invested in at least 300 outbound merger and acquisition (M&A) deals, involving deal values in excess of $40 billion (Rs1.9 trillion). A notable trend has been our appetite for acquisitions in North America and Western Europe, driven by our interest in brands, backward-forward integration and new market access.

Reduced valuations in recent times have made outbound M&As more attractive. In the last two-and-a-half years, Indian companies invested at least $14 billion in North America and $10 billion in Western Europe (at least $20 billion if you take into account the Tata-Corus deal which closed in early 2007).

This journey has, however, not been a smooth one. To begin with, Western vendors were apprehensive about buyers from emerging markets for a variety of reasons, including cultural differences, stereotypical mindsets and their relative inexperience in doing international transactions. Over the years, perceptions have been changing as Indian buyers continue to demonstrate that they are well positioned to address most concerns of Western vendors.

Marquee deals such as United Breweries Group’s acquisition of Whyte and Mackay Ltd, HCL Technologies Ltd’s acquisition of Axon Group Plc. and Tata Motors Ltd’s acquisition of Corus Group Plc. have exhibited that Indian buyers can articulate a compelling investment story, underpinned by strategic benefits for both the buyer and the vendor. Similar compelling examples were the proposed integration planning measures outlined by Indian acquirers for distressed assets.

While all the above factors have improved the visibility of Indian buyers abroad, there is still some way to go before we finally arrive. These include providing more comfort to Western vendors to enable their understanding of Indian financial reporting norms, to be prepared for a reverse due diligence in some cases, and to articulate the strategic rationale for the deal, as opposed to an impression of stripping value. Having said that, in these times, buyers, too, need to remain cautious and not get swayed by the process-driven divestiture mechanisms adopted by Western vendors—some Indian buyers already believe they may have overpaid for international assets in their exuberance, but that is another story.

IT Merger Alliances: 26/05/09

 

VAKRANGEE, TCS SIGN PACT
Mumbai
The Hindu Business Line

Vakrangee Softwares Ltd said on Monday it has signed an initial pact to work with Tata Consultancy Services Ltd on a passport project for the Government. Vakrangee and Tata Consultancy will work on six passport offices across the country. Vakrangee didn't reveal financial details of the Passport Seva Kendra project.

Mergers Update: 24/05/09

IT MID-MARKET M&A SPACE MAY SEE ACTIVITY SOON
Shamik Paul,Bangalore, May 25, 2009
The Hindu Business Line

Deal makers see a spurt in the IT sector mid-tier M&A (mergers and acquisitions) over the next two to three quarters tracking an anticipated recovery in the global economy.

The prevailing economic crisis, which impacted valuations significantly, has put a curb on M&A over the past two quarters as companies restrained from selling a business anticipating better pricing, while the primary focus for most has been on maintaining revenue and profitability in a declining environment.

“In the last 9 months, there has been almost a complete freeze owing to global issues and sentiment. We are beginning to see sentiment improving,” said Sanjeev Gandhi, Director in Grant Thornton India, M&A Technology, Media and Telecoms Team. The company is seeing an increase in levels of enquiries from potential acquirers especially for cross-border opportunities, he added.

Over the next few quarters vendors are going to realise the valuations may not go back to previous highs. “Once this adjustment takes place, the market re-aligns and there is a meeting of minds on valuation expectations between buyers and sellers, we expect M&A activity to pick up again,” Gandhi said. Liquidity should also start coming back into the market, which will give an impetus to deal activity, he added.

The US is in distress mode while India is in survival mode and the opportunity to acquire in the US, mainly for customers and customer-related skills cannot be let go, said Manohar Atreya, Head of Technology Investment Banking, o3 Capital.

“This year and next year may be a fantastic time to acquire. There are smaller IT companies in distress in the US. They are losing business to Indian players,” Atreya said. “We see a good amount of mid-market activity. We see good interest and progress on several transactions. The mid-market activity will continue,” he added.

Atreya said M&A will happen since people have started to believe in recovery. Throughout the recovery process, one would see good amount of activity. The interest is there, cash is there, and the environment is also conducive. Deal sizes could be from $15-20 million up to $300 million. While many assets are available in this range there are not many assets in the $500 million plus range.

It is unlikely one would see the return of the mega-deals at least in the medium term, as many companies have previously suffered from ‘acquisition indigestion’, said Gandhi. There is increasing interest in the traditional overseas markets such as the UK and US and also across Europe especially in larger markets such as France and Germany.

In the domestic market in India, Grant Thornton expects consolidation in certain sectors such as the BPO/KPO, where larger suppliers look to scale up and fill spare capacity. It also sees increased M&A activity in India in spin-offs of Captive BPO operations by global corporates.

M&A Updates: 21/05/09

 

NUCLEUS, INDONESIAN CO TIE UP
New Delhi
The Hindu Business Line

Banking and financial software company Nucleus Software Exports Ltd has entered into a channel partnership with Mitra Integrasi Informatika for its operations in Indonesia, a company release said today. ''This partnership will leverage Nucleus' domain experience and MII's local market knowledge,'' the release said. MII is a subsidiary of Indonesian information technology service provider PT Metrodata Electronics and focuses on IT system and network integration, consultancy and outsourcing services.

SATNAV IN PACT WITH HTC
Hyderabad
The Hindu Business Line

SatNav Technologies, a GPS navigation solutions company, has entered into a tie-up with HTC for bundling its SatGuide solutions with the latter’s phone. The company has similar arrangements with dealers of Asus, i-mate, HP and HTC that bundle the SatGuide maps as a key value add with various phone models sold in the Indian market.

“With these tie-ups, SatNav will extend the map data to all Windows’ phones present in the market. The software is bundled with phones like Asus P527, P750, i-mate Utl 8502, 9502 and HP. Now, the software will also be bundled onto HTC’s high-end models like P3470,” Amit Prasad, Founder, CEO and MD of SatNav Technologies, said here in a release.

SYSTAT SOFTWARE IN COLLABORATION WITH RESCENTRIS RELEASES SIGMACERF
Bangalore
The Financial Express

Cranes Software announced that its subsidiary Systat Software, Inc., (SSI) has entered into an agreement with Rescentris, Inc. of Columbus, OH, to globally offer their joint product, SigmaCERF - an Electronic Lab Notebook (ELN) and knowledge management platform for life science research organizations.

CERF, Collaborative Electronic Research Framework, is a unique ELN solution designed specifically for scientists and R&D organizations. SigmaCERF unifies management of lab data and electronic record-keeping. Projects, documents, data, and notebooks are managed centrally on a secure server but can be created and utilized from anywhere on the Internet. Industry experts predict the market for ELN to be one of the fastest technology growth areas as biotech organizations strive for maximum efficiency and safe access to IP records. To serve life sciences organizations, SigmaCERF is cross-platform, highly scalable, and 21CFR11-compliant.

“Lab notebooks are used by scientists and technicians to document research, protocols, experimental data and outcomes. The move from paper-based notebooks to electronic formats is very real with one-third of all biopharmaceutical organizations having at least one system installed today. We are excited to partner with a technology leader like Rescentris who has the vision and experience to develop an ELN solution that works the way biologists work – with additional modules for other scientific disciplines. Our SigmaPlot, SigmaStat and SYSTAT customers can now source tools that cater to different aspects of their research process from one single reliable source.” states Dr. Leland Wilkinson CTO, SSI.

The award-winning CERF technology brings flexibility, collaboration, and security to major research organizations and boosts R&D performance through a variety of unique capabilities. CERF utilizes semantic web technologies to enable extensibility and integration of the numerous data sources and applications used by life scientists. More than replacing paper, CERF organizes daily research activities for the scientist and the team – users access their data, tools and workflow and never leave the scientific desktop of CERF. The SigmaCERF platform further enables the delivery of the rich data analysis and publishing components provided by Systat.

 

HITACHI DATA SYSTEMS TIES UP WITH WIPRO INFOTECH TO OFFER IT SOLUTIONS
The Financial Express

As the market dynamics change, information companies are partnering with each other to strengthen their commitment in delivering cutting edge services to customers. Hitachi Data Systems, a wholly owned subsidiary of Hitachi Ltd, has partnered with Wipro Infotech to offer better customer services.

Says Natarajan Viswanathan, VP and managing director, India, Hitachi Data Systems, “The alliance with Wipro Infotech strengthens our commitment in delivering formal, flexible, cutting-edge channel programmes to our partners and this relationship will strengthen our foothold in different customer verticals.”

Hitachi Data Systems Corporation provides Services Oriented Storage Solutions that enable heterogeneous storage to be dynamically provisioned according to business needs and centrally managed via industry leading Hitachi storage virtualisation software.

Natarajan brings with him 29 years of experience in country sales management, business development and operational leadership of start-up organisations such as Bangalore Labs & Microland. He was also the area vice- president with Parametric Technology Corporation.

TECHMA EYES 50 PERCENT STAKE OF VGE IN SATYAM JV
Shweta Bhanot, Rachana Khanzode, Mumbai
The Financial Express

Tech Mahindra, the new owner of the Satyam Computer Services, is now eyeing 50 percent shares of Venture Global Engineering Services (VGE) in Satyam’s joint venture (50:50) company Satyam Venture Engineering Services (SVES). SVES would continue to operate as a separate entity and Satyam would continue to be a shareholder, sources close to development said. The Rs 70 crore SVES is an automotive division of Satyam and provides high-end engineering solutions.

However, the ongoing case filed by Satyam against VGE over breach of the joint venture agreement and events of default, is expected to delay the process of takeover by Tech Mahindra. Satyam had earlier filed the case in the London Court of International Arbitration seeking among other things, to purchase VGE’s 50 percent interest in SVES at the agreed upon book value price of the shares and was granted the same. However, VGE challenged the decision and appealed to the Andhra Pradesh High Court and the decision is still pending. Tech Mahindra’s dream will have to wait till the court disposes the case in Satyam’s favour. When contacted, Tech Mahindra officials said, “Since the matter is subjudice, we are not in a position to comment about it.”

An industry expert said, “Mahindra & Mahindra (M&M) has a vision to get its hands on everything that goes into automotive manufacturing, from design to the whole product. M&M will be able to leverage automotive engineering expertise of SVES for its automotive business.” He added that with these capabilities, M&M would be able to negotiate on costs with SVES, which may not be the case with other engineering service players in the market.

Another industry expert with domain knowledge in automotive added it will depend upon how the company plans to chalk out its synergy plans and pointed that since the work is contract based and clients look for securing the intellectual property right (IPR), one needs to watch out how much M&M can extract from the new buy out. The Indian automotive engineering services industry is expected to grow at a compounded annual growth rate of 32 percent by 2012-13. “The industry has generated revenues to the tune of $500-600 million in 2007 and there is $2.2 billion potential outsourcing opportunity in the next two years,” said Frost & Sullivan, South Asia and West Asia director (automotive and transportation) VG Ramakrishnan. However, he added there was a need at the industry association level to spin off automobile engineering services from IT sector, furnishing an example of Satyam Ventures, which is totally into automotive engineering services.

 

M&A Update: 19/05/09

WIPRO TECH TIES UP WITH ORACLE
Bangalore
The Economic Times  Business Standard  DNA  The Hindu Business Line  Financial Chronicle  The Financial Express  

Wipro Technologies said on Monday that its Business Process Outsourcing division, Wipro BPO has partnered with Oracle for 'best-of-breed HR platform solutions.'

Wipro has also selected The Hackett Group, a global strategic advisory firm, to provide empirical data, best practices and world-class performance insights on the development of its innovative bundled solution platform, it said in a release here.

The solution simPlify, allows employers to reduce and control cost as it provides an opportunity to centralise and standardise processes while eliminating duplicative management structures.

The solution has the ability to leverage a many-to-one technology capability, while maximising service quality and HR customer satisfaction.

 

MASCON BOARD OKAYS ACQUISITION PLAN
Financial Chronicle

IT services provider Mascon Global on Monday said its board has approved to proposal of acquiring a company abroad and recommend the same to the investment committee.

GEODESIC BUYS
Business Standard

Mumbai-based Geodesic, provider of desktop communication and entertainment solutions, has acquired South American-based Interactive Networks. The firm provides software for advanced instant messaging and value-added solutions. The value of the deal was not disclosed.

BARTRONICS TO PARTNER ESSEN
Mumbai
The Hindu Business Line

Bartronics India has entered into a partnership to procure Essen RFID's ultra high frequency (UHF) integrated reader `XtennaPlus' for its R&D centre. Under the agreed terms & conditions for the partnership, Bartonics will also feature the UHF integrated reader "XtennaPlusTM" in its RFID product catalogue, according to a press release. "This agreement is a win-win proposition for both Bartronics as well as Essen & will go a long way in strengthening the existing synergies between the 2 organisations in the UHF RFID market," Bartronics' Chief Scientific Officer, Srinivasa Parasa, said in the release.

 

VISION CORPORATION SIGNS MOU WITH TCIL
New Delhi
Business Standard

Vision Corporation, Mumbai-based media and entertainment company, has signed a Memorandum of Understanding (MoU) with Telecommunications Consultants India (TCIL) for taking up projects in the information technology & telecom sector.

Under the MoU, the company will source the projects, which will be executed by TCIL. TCIL is a public sector telecommunication consultancy and engineering company operating under the Department of Telecommunication.

In another development, the company has signed a long-term agreement with Reliance Big TV for Direct To Home (DTH) services, feature films, music and other content for which the revenue will be shared equally.

Update: 18/05/09

 

M&A TRANSACTIONS FELL BY HALF IN APRIL
Mumbai, May 17, 2009
Business Standard  The Financial Express  

Merger and Acquisition transactions, excluding group restructuring deals, more than halved in April this year to $427.55 million as compared to $1.13 billion in the same month last year.

Twenty M&A transactions were struck in April 2009 as compared to 42 deals in April 2008, Grant Thornton said in a statement.

There were 13 domestic deals, both acquirer and target being Indian, with an announced value of $351.33 million and seven cross-border deals valuing at $76.22 million during the month.

Four of the cross border deals were outbound deals, where Indian companies acquired business outside India, with a value of $31.78 million and three were inbound deals, where international companies or their subsidiaries acquired Indian business, with a total value of $44.44 million, it said.

The total number of M&A deals during the first four months of 2009 now stands at 74 valued at $2.03 billion as against 174 deals amounting to $9.43 billion during the corresponding period last year.

In 2008, 454 M&A deals were announced with a total value of $30.95 billion.

During April this year, there was one Group Merger & Restructuring announced between Network 18 Media and Investments and Capital 18 Media Advisors for an undisclosed amount, Grant Thornton said.

The total number of Private Equity deals announced in April 2009 stood at 15 valuing at USD 493.94 million as against 32 deals amounting to $562.85 million in the same month last year.

During the first four months of the current year, the total number of PE deals stands at 56 valued at $1.31 billion as against 149 deals amounting to $4.68 billion during the corresponding period in 2008.

 

Cognizant Ties with SAP

COGNIZANT AND SAP TIE UP ON GLOBAL SERVICES PARTNERSHIP
Chennai
The Economic Times The Hindu

IT services provider Cognizant has tied up with SAP AG on a global services partnership to deliver increased business value to customers by streamlining their engagement.

The Cognizant SAP Touchstone Center, set up in 2008 at Cognizant's facility in Bangalore is already working in coordination with SAP Co-Innovation Labs worldwide for development in support of SAP solutions.

With this agreement, Cognizant joins a select group of companies that are a part of the SAP global services partnership program.

IYOGI ACQUIRES CLEAN MACHINE INC
New Delhi
Business Standard The Hindu Business Line

Gurgaon-based computer technical support provider iYogi today said it has acquired Clean Machine Inc, a personal computer security and performance management service provider, for an undisclosed amount.

Clean Machine will operate as a separate barn under iYogi services umbrella, the Gurgaon-based company said in a statement.

iYogi will integrate technology that Clean Machine has developed. This acquisition will also enhance iYogi's access to key markets through Clean Machine's existing partnerships.

"This acquisition will help iYogi to enhance our customer experience and extend our market reach to millions of consumers that are challenged by the increasingly complex technology environment," iYogi CEO and Co-Founder Uday Challu said.

iYogi provides personalised computer help and support for small businesses in the US, the UK, Canada and Australia.